Bare with me on this one because I’m aware that this can sound a bit clickbait-y.
Some of the best traders I’ve known only know how to trade one setup. One. That’s it. They know that setup intimately, they know the nuances of that trade and when that trade really sets up they smack that trade with an ungodly amount of size. They epitomise Bruce Lee’s famous quote:
I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times.Bruce Lee
I’ve been massively guilty of setup hopping.
The logic behind doing this was that if my best setups stop working I’ll have backups to diversify.
In practice what has happened is that I’ve spent years toying around with setups that I only ever understood 70% as well as I should have. My attention was spread so thin that I never fully mastered them. The result is that they’ve been a drain on my bottom line for a lot longer than they should have.
If I had stuck to trading my best two or three setups only, I’d have more money than I have now.
What separates the good traders from the great traders is a true mastery of a small number of setups. The great traders truly understand the nuances of the trade. They understand when the trade is showing a high probability of working and they size up dramatically. They understand the market conditions it works best in. Most importantly they know when not to trade it. Understanding a setups limitations is one of the most important elements of the trade.
If I were to do it again here is what I would do. Try a number of setups, because you’ll need a sampling period to see what setups you naturally gravitate towards based on your personality.
Out of those setups spend all of your time focusing on the one that shows the most profitability. Become a specialist. The more consistency the trade shows, the more you increase your size. Only once you’ve mastered the best trade and are trading as much size as the market can take should you begin to work backwards to the next most profitable setup. Ruthlessly avoid the trades you haven’t mastered and don’t understand.
Remember, the market does not pay you linearly or based on hard work so you need to exercise the best judgement you can at all times. If the setup is grounded in the basics and you’re aware of it’s limitations then one setup can make your trading career.